Calculating the Reason for Focusing on Retention

Thomas Kulp serves as executive director for Universal Athletic Club in Lancaster, PA, and has spoken in four countries and all over the United States this year on the subject of retention and club management. Kulp works with Face2Face Retention Systems to improve retention in the health club industry. Feel free to visit his blog athttp://fitnessclubconsultants.blogspot.com. He can be reached at 717-490-8063 or tom@universalathleticclub.com.

We often think that retention is something we will worry about later. Club owners have so many other things on their to-do list that improving retention seems to fall far down on the list of must-do items.

Running a large club myself, I am faced daily with time-consuming duties. A member needs attention, a staff member is in need of coaching, an insurance agent is in need of your precious time, and the list goes on and on. It is hard to find the time to prioritize the important goals for the day, let alone plan for the future of your business. Sometimes we need to take a moment and decide to do the things that insure a great, successful place of business. We cannot afford to keep churning through members because the process of acquiring new members is very costly.

Here are some of my tips to help you keep the members that you already have:

Plan on great sales numbers every month. At my facility, we plan to increase our membership accounts, personal training revenue, pro shop sales, towel service and all of the other many avenues of revenue that we count on each month. We need to make sure that our bottom line keeps getting stronger. When it is, we are able to smile and make plans for building our business. But what if we could find a way to make that process even easier on a daily, monthly or even yearly basis? By making sure that your members stay at your club longer, you will find that new sales become less important. Your existing members will start to invest more of their money in your club and purchase things that have become more important than ever to them. You have become part of their life and have crossed the line from want to need. You have earned their business, and they will be more than willing to reward your efforts.

Competition is not going to go away. In fact, in most markets, the number of clubs and the types of clubs are increasing. Pressure is coming from the full spectrum, from small personal training studios to large national chains. Your local hospital, YMCA or even a local church is thinking of adding or expanding into the fitness business. What are you going to do, as these factors start to slow the number of prospects coming through the door? To compete, it is a matter of changing focus. Get your members involved. If you do, members will stay longer, spend more time and invest more money at your facility.

Do a quick math problem. All you will need are your current number of accounts, the average retail value of those accounts and a calculator. Take your current number of accounts and multiply that number by a factor of 2 percent. Then take that product and multiply it by the average retail cost of your accounts. That answer is the increased revenue that will be generated by a 2 percent increase in retention. Pretty eye opening, right?

Now, consider that this money is very clean, that there is not a lot of increased costs that come with it and that the money is truly very close to an increase in your net income. First, let’s face the fact that the longer members stay, the more independent they will become.

Here is an example of a typical club:

Active accounts: 2,500 Average retail cost: $700

2,500 x .02 = 50 increased accounts remain into year two

50 x $700 = 35,000 additional dollars to your bottom line

Is $35,000 extra profit worth your effort and your change of focus?

Now try one of our actual client returns:

Active accounts: 5,500 Average retail cost: $1,000

5,500 x .05 (yes, a 5 percent increase) = 275 saved accounts

275 x $1,000 = 275,000 additional dollars to your bottom line

This is possible for you if you start to change your focus today. You should take a look at your new member induction process. It is no longer OK just to add a quick introduction to your club and slap together a workout plan with your friendly personal training staff. It takes much more. You should: